M&G GROUP, the City fund manager, plans to set up a US investment management business as part of a new expansion strategy abroad.

The company, which yesterday reported an unchanged full-year result, said the move was aimed at winning business from American institutional clients.

M&G, one of Britain's oldest unit trust companies, has until now concentrated on managing funds for UK investors.

Tony Shearer, finance director, said: 'We have never had a presence outside the UK but it is a good time now to have a go.'

At present the company manages a dollars 100m commodity fund for an American client, but believes it will take at least a year to win more business.

As a first step, M&G is opening an office in New York with two staff who will focus at first on marketing the company's track record at home. The group manages about pounds 8.6bn in the UK, of which pounds 4bn is linked to unit trust funds and pounds 2.45bn is managed on behalf of institutional clients.

M&G reported marginally higher taxable profits of pounds 39.2m for the year to 30 September. Earnings per share were maintained at 36.4p.

A final dividend of 11p makes a total of 20p, a 5.3 per cent increase on last year.

Sir David Money-Coutts, chairman, blamed the stagnant profits performance on the recession, which had led to low investor confidence and a lacklustre stock market performance.

Unit trust sales fell by 37 per cent to pounds 295m, while redemptions - the amount cashed in by investors - rose to pounds 404m from pounds 345m. The net increase in new unit trust sales was pounds 109m. But the group's market share in the unit trust sector improved slightly to 14 per cent.

Marketing and commission costs jumped from pounds 10m to pounds 18.5m reflecting the cost of launching two investment trusts in the year. Together they raised pounds 376m, and represented the biggest launch to have been made in the sector.

The company reduced its total staff by about 49 to 711 at a cost of about pounds 600,000.

David Morgan, head of investments, said he believed the stock market would continue to be buoyed by an economic recovery in the US and further cuts in interest rates in Britain.

He was bearish about prospects in continental Europe, although the Far East, including Japan, could strengthen. Equity investments were likely to outperform fixed-interest markets.